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Railway privatisation in America

The history of railways in Britain follows a similar pattern that found throughout Europe and much of the world. The railways were built by private companies, which later merged and combined and were ultimately nationalised into a single, state-run operator. Britain is of course unusual in having since privatised its rail network again, notionally at least, with trains now run by a mixture of private companies on rails owned by a single publically owned body, Network Rail. Elsewhere in Europe, publically owned rails are increasingly opened to private rail operators under the European Union’s Directive 91/440/EC.
However, in North America, the opposite situation exists. The United States is one of the few countries that never truly nationalised its railways. However the government did indirectly take charge of passenger services by forming Amtrak in 1971. This has led to a situation where a national passenger operator, supported by state subsidy, operates a network over lines owned and maintained by numerous private freight railroads.
The formation of Amtrak in 1971 came at the end of a long story of decline for America’s passenger rail services. Trains were seen as an outmoded form of travel, supplanted by the automobile and the passenger airliner. Both road and air travel were receiving massive state assistance through the building of the Interstate network and new airports and air traffic control infrastructure. Meanwhile passenger railroads were struggling to compete, held back by overbearing taxation and political conflict over the proper way to assist the industry, should it be assisted at all.

With railroads continuing to fail, public pressure mounted to save passenger services. However the Democrats were unwilling to subsidise the for-profit private railroad companies, and the Republicans were opposed to nationalisation. This situation led to the decision to create a publically supported body that would take over passenger services from the private operators. While some private services lingered on into the 1980s, the majority chose to shed their services to the new operator.

Fast forward thirty five years and today’s Amtrak network is a mere shadow of the services it inherited in 1971. The ongoing drive to bring it closer to financial independence has left a dwindling system of slow, infrequent services appealing largely to leisure travellers. Two of the contiguous states are completely without service, and away from the key North East Corridor and Californian Coast routes, trains are not seen as a viable way of travelling compared to the extensive Interstate and airline networks.

Freight railroads, however, continue to be a lucrative industry, and a series of mergers has led to a few titans like BNSF, Union Pacific, Kansas City Southern and CSX controlling vast networks that span the country. On these lines speeds are slow, the networks being designed for America’s distinctive multi-mile long lumbering freight trains. While efforts to create new high-speed lines have been underway in several states, none have so far come to fruition, and no high speed trains operate (by the European definition of 200km/h) outside of the Boston-Washington DC North East Corridor, the only substantial area where Amtrak has control of its own rails.

The benefits of vertical integration here are as obvious as they are in the British system. Having operator and infrastructure be the same organisation avoids conflicting priorities and makes sure infrastructure operators are responsible for the punctuality of the trains using their rails. Whether it’s Amtrak running on Union Pacific metals in the US, or London Midland running on Network Rail ones in the UK, the hybrid of public and private ownership seems to create more problems than it solves.

It’s easy to assume that the solution to this is a single nationalised network, but this removes all opportunity for competition and shifts accountability from the passenger to the taxpayer. Instead, the proper solution in 1971 would have been to level the playing field between railroads, airlines and road transport, allowing private operators to continue operating their own services without government driving investment into competing modes.

Fortunately, there is now a glimmer of hope on the horizon. In Florida, the first of a new breed of private passenger railroad is emerging. The curiously named ‘Go Brightline’ is a private sector project to link Orlando, Fort Lauderdale and Miami with fast, modern services positioned to compete with road and air travel. For the first time in nearly four decades, privately operated passenger trains will link American cities along tracks owned by the same operator.
Despite the radically different geography, America, like Britain, provides a clear case study of how separating operation and infrastructure produces the wrong outcomes for the passenger. All too often this is ascribed to the failure of privatisation, but neither passenger system is truly in private operation. One place where railways are truly privatised is Japan, a country which enjoys a thriving passenger rail network that easily ranks as one of the best in the world.

It will be interesting to watch the progress of the Go Brightline project as it begins operating over the next few years. Hopefully it will demonstrate how true private operation can present a viable alternative, both to the inadequate Amtrak network and to proposed multi-billion dollar public sector projects that are rightly so off-putting to the American electorate.

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3 comments for “Railway privatisation in America”

Patrick Crozier

Jun 6, 2016 at 4:07 pm

It is almost impossible to understate how much damage the separation of wheel and rail has done in the UK. Although railways have vastly improved over the last 15 years they have done so at massive cost. General managers of the private railways of the past must be turning in their graves.

Vertical integration matters because just about every decision you make about trains has an impact on the infrastructure. You want electric trains? then you need electric infrastructure. You want faster trains? then you’ll need fewer curves. You want bigger trains? then you’re going to have to rebuild bridges and tunnels.

Paul Marks

Jun 6, 2016 at 8:01 pm

Stop subsidising the roads – the Constitution says that Congress man build “post roads” but it does NOT say that Congress must do so.

And stop strangling the Railroad with regulations.

In the 1960s it was not just the “free” roads that undermined the railroads it was strangulation by price controls and endless other regulations.

The same was true in Britain – for example the 1906 Act that put unions above the law (although even the 1875 Act had allowed paramilitary obstruction and intimidation under the military word “picketing”).

As for denationalisation.

As the writer correctly points out – the “private” British system is nothing of the kind.

“Network Rail” (which controls the track and so on) is 100% government owned.

I am told Japan might be a better example of actual denationalisation.

Julie near Chicago

Jun 8, 2016 at 3:48 pm

Very good piece. And comments. Again, some of us were pretty unhappy about Amtrak. So thanks very much for the column, and the comments, with the brief history and the “where we are now.”

.

My only caution would be to watch out for the Eminent Domain Monster. An awful lot of people’s land was taken to build the Interstates (which I enjoy as much as anyone, be it known — but it wasn’t right). And “just compensation,” as was known from the start by some, doesn’t necessarily cover it, not even financially; and for most people, I think, losing a portion (or all) of their property against their will. There are still billboards up saying things like “Welcome to 140 mutilated acres.”